16 February 2011  Record high food prices are putting added pressure on the United Nations agency that helps feed nearly 100 million of the world’s poorest people, with officials warning of a potential “perfect storm” combination of soaring costs, weather emergencies and political instability.

“We are on red alert and we are continually assessing needs and reassessing plans and stand ready to assist,” UN World Food Programme (WFP) Executive Director Josette Sheeran told the UN News Centre, as her agency develops an action plan for early purchasing and setting up reserves and safety nets. “Rising food prices are a reality for the whole world, but they have the biggest impact on the poorest and most vulnerable populations.”

If prices continue to rise, due in part to adverse weather such as floods, droughts and fires, or even stay at the same high levels for the rest of the year, WFP will face a serious budget gap, forcing it to make the kinds of painful decisions it faced during the previous food price crisis of 2008: reduce rations, decrease beneficiaries, try to obtain additional resources.

Meanwhile for households already living at subsistence level, the rises mean increased levels of malnutrition, a decrease in income available for schooling or access to health services, and potential instability, such as bread riots, in those countries that are worst affected.

WFP’s forward purchase of food while market prices were relatively low in 2010 has helped to minimize the impact on its budget, but every 10 per cent increase in the price of its food basket, costs an additional $200 million a year to buy the same amount of food.

The five-point action plan to help countries cope with rising prices and provide a stable supply for the most vulnerable populations calls for scaling up WFP’s advance purchase and pre-positioning facilities, allowing access for WFP to national and regional food stocks during a crisis, and building up small regional food reserve systems under its management.

It also calls for scaling up social protection safety nets such as mother/child nutrition, school meals, and job creation programmes; support for smallholder women farmers, including using local purchases by WFP to promote smallholder production; and strengthening commitments made at the 2009 UN Rome summit on food security to exempt humanitarian food from export bans, restrictions or extraordinary taxes.

The fifth point proposed setting up a multilateral mechanism to improve analysis of food prices, production and stocks to enhance transparency of food markets.

What may not be a food crisis in some parts of the industrialized world could be devastating to the 80 per cent of the world population that lives without food safety nets, WFP officials stress, noting that people living in these nations are highly vulnerable and do not have the resiliency or cash to help them survive in highly volatile markets.

The latest UN Food and Agriculture Organization (FAO) Food Price Index averaged 231 points in January, up 3.4 per cent from December and the highest level since it started in 1990. Another measure, the World Bank’s food price index, rose by 15 per cent between October and January and is now only 3 per cent below its 2008 peak. Whichever measure is used, the result is the same: 44 million more people thrown into extreme poverty.

“I feel we have now entered a danger zone,” World Bank Managing Director Ngozi Okonjo-Iweala said. “National food security issues are becoming a global food security issue. This is a challenge for the world. Almost one billion people are going to bed hungry.”

Rising demand from rapidly developing economies like China, droughts, floods and fires and the diversion of food crops to the production of bio-fuels have all had an impact as has the export ban imposed by some countries in the face of shortages.

For example, the cost of wheat has almost doubled over the past six months and is continuing to rise, largely due to drought and fires in Russia in 2010, floods in Australia, and the imposition of export bans by producing countries. Wheat prices are still below the peak of the 2008 food price crisis, but if current trends continue, they will reach these levels. Oil prices have also passed $100 a barrel, the point where using maize for bio-fuel production becomes much more viable.

“The international community needs to help developing countries mitigate the impact of food price hikes and the volatility of food prices, and I think that there are several measures that we can take,” Ms. Okonjo-Iweala said. “One is to improve the transparency of information on food stocks. Often there is an excess of food produced in one country, which can be distributed to another but we just don’t have that information.

“We also need to help farmers with better forecasting, we need to help with better storage and distribution systems.”

The World Bank’s Food Price Watch reported that the increase in extreme poverty (under $1.25 a day) due to the price hike is associated with higher malnutrition, as poorer people eat less and are forced to buy food that is both less expensive and less nutritious.

Beyond the near doubling of wheat prices, maize is 73 per cent higher, but crucially for many of the world’s poor, rice prices have increased at a slower rate than other grains. Sugar and edible oils have also gone up sharply. Other food items essential for dietary diversity in many countries have increased, such as vegetables in India and China, and beans in some African countries.